On February 9th of this year, both Federal and State officials announced a landmark $26-billion agreement with the nation's five biggest mortgage servicers, Bank of America, Citibank, JPMorgan Chase, Wells Fargo, and Ally/GMAC, in an effort to settle the many investigations involving foreclosure abuses as well as using this as a means to stabilize the housing market.
However, the settlement needed a judge's final approval which happened today clearing the way for the nation's five largest lenders to start helping homeowners.
The settlement has certain guidelines that the banks must follow while compensating homeowners who were wrongfully foreclosed upon which affected nearly one million homeowners.
Here is a breakdown on how the settlement money will be distributed:
- $17 billion will be used to modifying mortgages of currently delinquent borrowers which will include principal reductions for mortgages of $100,000 or more.
- $5 billion will be paid in cash to California and 40 other states to make amends for foreclosure paperwork issues and the inappropriateness taken by the servicers in the foreclosure process.
- Nearly 4 billion will go towards refinancing mortgages for homeowners who are current on their mortgage payments.
The banks will have immunity from any future claims by the state governments for wrongdoings in the processing of foreclosures as long as the 5 banks follow the terms of the settlement.